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Sunday, December 11, 2011

Teen
retailer Pacific Sunwear of California Inc., hoping for a financial
turnaround after a three-year slump, said it plans to close as many as
200 of its weaker-performing stores around the country.

The
Anaheim-based company known for its surf- and skate-inspired apparel
also said it had secured $160 million in financing for its overhaul,
even as it reported its 13th straight quarterly loss, of $17.6 million.
That compares with a $6.96-million loss in the same period a year
earlier.

The new financing, along with the store closings, "greatly enhances
our financial and operating position, and is a critical step forward as
we work to reestablish PacSun as a leading specialty retailer across the
U.S.," Chief Executive Gary Schoenfeld said in a statement Wednesday.

The news sent PacSun shares as high as $1.99 in after-hours trading, a
47% gain over its closing price of $1.35. The stock could use the
bounce; PacSun shares have lost 75% of their value since Jan. 1.

In an interview, Schoenfeld would not say which stores would close or
the number of jobs that would be lost. "They are spread across the
country," Schoenfeld said. "But in general our business in California
continues to strengthen."

The company said its new financing came
from two principal sources. It said it obtained a $100-million
revolving line of credit from Wells Fargo Capital Finance and a
$60-million secured loan from San Francisco-based Golden Gate Capital, a
private equity firm with substantial retail and restaurant holdings.

Golden Gate was given two seats on the PacSun board.

Analysts say that the last few years has been a troubled time for the
retailer, which has suffered from a lackluster product mix and lost
ground to more trendy competitors.

"They lost their way a bit on
merchandising, and as a result have lost relevancy with their core
customer," said Pamela Quintiliano, a specialty retail analyst at
Oppenheimer & Co. "They are struggling to regain credibility."

Quintiliano said that PacSun's mix of private-label and third-party
surf brands — such as Roxy and Billabong — hasn't attracted trend-hungry
youngsters who are eager for up-and-coming designers. As a result, many
have flocked to rivals such as action-sports chain Zumiez Inc., which
has been more conscious of offering exclusive merchandise.

PacSun's "private-label brand wasn't cheap enough to attract customers
nor was it differentiated enough," Quintiliano said. "They are also not
the only stores in the mall to have Roxy or Volcom; other stores carry
them too."

That's something PacSun has been eager to change. The
company has shaken up its women's merchandising and design team as part
of an effort to produce more trendy apparel to better appeal to female
shoppers, Schoenfeld said. The company is also trying to target an older
teen and early-20s customer base to better align itself with its more
successful menswear.

"The women's business has been where there
has been some significant declines," Schoenfeld said. "Historically
PacSun was a pretty basic tees and shorts and fleece business on the
girls side, and she's definitely looking for on-trend and fashionable
merchandise."